Can extra-financial ratings serve as an indicator of ESG risk?

Champagne, Claudia; Coggins, Frank; Sodjahin, Amos

doi:10.1016/j.gfj.2021.100638

Cited by 29 publications

(11 citation statements)

References 62 publications

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“…Reference [38] alludes that significant differences with respect to companies' ESG disclosure are due to different social contexts, country classifications and their stakeholders whereby companies in riskier sectors may use ESG disclosure as a way to show responsibility [37]. This is in line with [39]'s assertions that ESG priorities vary by sector in a sense that capital-intensive industries such as coal, oil, natural gas, and chemical are more exposed to environmental problems than labour-intensive industries such as retailing which are more inclined to social problems associated with human rights issues and compliance with international labour standards [39].…”

Section: Esg and Different Industriesmentioning

confidence: 68%

Do Companies in Different Industries Respond Differently to Stakeholders’ Pressures When Prioritising Environmental, Social and Governance Sustainability Performance?

2021

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Good sustainability decisions depend on how companies respond to wide-ranging exposure to exogenous and endogenous pressures. The purpose of the article was to determine whether companies in different industries respond differently to stakeholders’ pressures when prioritising Environmental, Social and Governance sustainability performance (ESG-SP) activities. Data of six sectors, with a total of 75 companies was extracted from the CSRHub database, which is a rating agency that focuses on assessing ESG performance of companies. The ANOVA, pairwise comparative and multiple comparison Tukey HSD tests were applied to compare mean scores across the sectors. Overall industry scores show no evidence of ESG-SP differences across industries in the sectors examined. It was however revealed that three (3) out of twelve ESG ratings have significant differences namely: Community Development and Philanthropy; Human Rights and Supply Chain; as well as Compensation and Benefits. The study found that the type of industry does not have a significant role in determining the ESG rating of a company. Future studies can look at a longitudinal analysis to shed light on the pattern of sustainability practices across companies that are listed on the JSE.

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Section: Esg and Different Industriesmentioning

confidence: 68%

Do Companies in Different Industries Respond Differently to Stakeholders’ Pressures When Prioritising Environmental, Social and Governance Sustainability Performance?

2021

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“…These factors, generally categorized as ESG scores, encompass various elements from sourcing, governance, and ownership. ESG risks can lead to revenue loss, decreased customer loyalty, litigation, regulatory sanctions, and share price decline, among others (Champagne et al, 2021). Conversely, higher ESG scores have been associated with lower capital costs, reduced tail risks, and increased cash flow to creditors (Gregory, 2022a).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

IFRS and ESG Disclosure in Indian Corporate Sector

Dayanandan,

Donker,

Kuntluru

2023

Journal of Emerging Market Finance

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World-wide, there is movement toward embracing environmental, social, and governance (ESG) issues in corporate conduct and performance. These developments have led to movement toward “reimagining capitalism,” and many firms have ridden the wave of investor enthusiasm for firms that prioritize ESG disclosures. The present study examines the role of International Financial Reporting Standards (IFRS) in India on ESG and overall ESG reporting. The Indian capital markets regulator, SEBI, had made integrated reporting compulsory for listed firms to disclose information about matters that substantively affect the organization’s ability to create value over the short, medium, and long term at a time. Motivated by this episode, we examine how accounting regulations in the form of IFRS could influence ESG disclosures in India. Based on the ESG scores of 104 non-financial firms in India from 2013 to 2021, the study finds a positive relationship between ESG reporting and IFRS introduction in India. The performance of firms (return on assets) and leverage had a negative impact on ESG disclosures. JEL Codes: G14, K22, L51, M38, M41

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“…In fact, exposure to ESG risks materially increase portfolios’ risks (Hübel & Scholz, 2020 ). These risks can be measured by ESG ratings (Champagne et al, 2021 ). Divergences in ESG ratings may occur, driven by variations in scope and measurement between raters (Berg et al, 2019 ) and reinforced in case of greater ESG disclosure (Christensen et al, 2021 ).…”

Section: Literature Reviewmentioning

confidence: 99%

On ESG Portfolio Construction: A Multi-Objective Optimization Approach

Xidonas

Essner

2022

Comput Econ

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Ahead of the new asset management era that calls for sustainable investments, the limitations of the traditional bi-objective mean–variance framework need to be resolved, to accommodate responsible investment objectives. In this paper, we propose a multi-objective minimax-based portfolio optimization model, attempting to simultaneously maximize the risk performance of the three typical ESG investment objectives. Also, apart from the systematic risk, the underlying formulation incorporates the controversy dimension, associated with each company participating in the optimal ESG portfolio. The validity of the proposed model is assessed through an extensive empirical testing on the EURO STOXX 50, the DAX, the CAC 40 and the DJIA, for a 5-year period. The results are considered as highly satisfactory, since the optimal ESG portfolios produced by the model provide consistently higher risk-adjusted returns, in comparison to their respective market benchmarks.

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Can extra-financial ratings serve as an indicator of ESG risk?

Cited by 29 publications

References 62 publications

Do Companies in Different Industries Respond Differently to Stakeholders’ Pressures When Prioritising Environmental, Social and Governance Sustainability Performance?

Do Companies in Different Industries Respond Differently to Stakeholders’ Pressures When Prioritising Environmental, Social and Governance Sustainability Performance?

IFRS and ESG Disclosure in Indian Corporate Sector

On ESG Portfolio Construction: A Multi-Objective Optimization Approach

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